Europe: FTSE 100 lags on energy stocks, dollar earners

[LONDON] Britain's top share index lagged other European markets on Monday due to weak energy stocks and dollar earners, with GKN also falling after it rejected a final offer from Melrose.

Early gains for the FTSE 100 quickly petered out and it ended the session down 0.1 per cent, missing out on a rally that lifted European stocks, with Germany's DAX up 0.6 per cent.

Falls in UK-listed miners and oil majors had a big influence as the price of metals and crude fell.

A stronger pound weighed on big dollar-earnings stocks such as consumer staples. Shares in Reckitt Benckiser and tobacco makers British American Tobacco and Imperial Brands fell between 0.4 per cent and 1.9 per cent.

Sterling rose on optimism that a Brexit transition deal might be agreed next week, after a junior minister said Britain was very close to sealing one with the European Union.

"Both the prospect and the timing of a transitional deal on Brexit remain highly uncertain. If such a deal does take place, however, it could be an important positive development for sterling in the near term by reducing "cliff-edge" risks,"strategists at UBS said in a note.

Merger and acquisition news also drove British equities, with GKN's shares reversing course after it rejected Melrose's final US$11.2 billion offer for the engineering company, saying that the turnaround specialist was not the right owner.

Takeaway company Just Eat was among the biggest fallers, ending 0.9 per cent lower after Deutsche Bank cut its rating to 'sell'.

"Just Eat is expanding into food takeaway delivery, an already crowded market, versus the company's existing position as an order aggregation platform," Deutsche Bank analysts said.

Competition from rivals such as Deliveroo and UberEats would also crimp its growth, Deutsche said.

Just Eat's shares are down 8 per cent since its results last week, when it said it would invest in delivery in the UK, Canada, Australia and New Zealand.

Overall the results season has been encouraging, said Peel Hunt strategist Ian Williams.

"There have been a few profit warnings in the consumer-facing areas, but 2017 reported numbers have come in a bit better than expected and the growth number for 2017 has come up a bit," he said.

The FTSE 100 remains cheaper than euro zone stocks on forward price-to-earnings, after February's sell-off sent valuations across markets down.

"I don't think you can argue that valuation is going to bounce back to its previous level," added Mr Williams.

REUTERS